Certified Internal Auditor Governance & Organizational Structure 2

Question 1

An independent board director is best characterized as someone who:

Accepted Answer

Has no material relationship with the company that could influence their judgment

Answer

Board independence requires that a director have no material relationship with the company—financial, personal, or professional—that could impair their objective judgment, as defined by stock exchange listing standards.

Question 2

Under Sarbanes-Oxley and stock exchange rules, an audit committee should be composed of:

Accepted Answer

A majority of independent directors, with at least one member qualifying as a financial expert

Answer

SOX Section 301 and NYSE/NASDAQ listing rules require audit committees to consist entirely of independent directors, with at least one member designated as a financial expert.

Question 3

According to IIA Standards, what is the recommended reporting relationship for the chief audit executive (CAE)?

Accepted Answer

Functionally to the audit committee and administratively to senior management

Answer

IIA Standards recommend the CAE report functionally to the audit committee to preserve independence and administratively to senior management for operational support.

Question 4

A 'staggered board' (also called a classified board) in corporate governance means:

Accepted Answer

Directors are divided into classes elected in rotation, so only a portion of the board faces election each year

Answer

A staggered or classified board divides directors into classes with different multi-year terms, meaning shareholders can only replace a fraction of the board at any single election.

Question 5

A board-level risk committee is primarily responsible for:

Accepted Answer

Overseeing the enterprise risk management framework and the organization's risk appetite

Answer

The board risk committee oversees the enterprise risk management framework, approves the organization's risk appetite statement, and monitors major risk exposures.

Certified Internal Auditor Practice Test

Certified Internal Auditor Practice Test

Certified Internal Auditor Governance & Organizational Structure 2